Beyond Detroit, city takeover may benefit Michigan governor

March 14 Thu Mar 14, 2013 4:20pm EDT

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March 14 (Reuters) - Rick Snyder's decision to put Detroit in the hands of an emergency financial manager on Thursday may not go down well in the heavily Democratic Motor City, but the Republican governor has the chance to go down in Michigan history as the man who saved Detroit.

The biggest state takeover of an American city in over two decades comes the year before many expect the businessman-turned-governor to seek re-election in 2014. In any political calculating, Snyder probably didn't count on Detroiters getting him to a second term.

"The people of Detroit are not going to vote for Rick Snyder anyway," said Bill Ballenger, a longtime pundit and publisher of Inside Michigan Politics. "I think there is a fairly strong majority of people outside Detroit who feel an emergency manager should be appointed."

For fixing the finances of the majority black city, Snyder tapped Kevyn Orr, an African-American lawyer and life-long Democrat who studied in Michigan and specializes in corporate bankruptcy. At his presentation to the Detroit media on Thursday, Orr acknowledged the political pressures on Snyder, including from those who asked why he was spending so much time on Detroit.

He said the governor told him, "It is the right thing to do and the right time to do it."

In his first political office, Snyder, the former chief executive of venture capital firm Ardesta, has earned the reputation in the governor's mansion as a businessman who gets things done, with little regard for the political fall-out. His campaign to rescue Detroit has the tone of an impatient CEO, employing the slogan "Detroit Can't Wait."

Orr's appointment will likely usher in a new period of painful cutbacks for a city long in decline, but he said he wants to avoid sending Detroit to bankruptcy court. Such a filing, if allowed by the state, would be the biggest Chapter 9 municipal bankruptcy in U.S. history.

'NO DOWNSIDE FOR GOVERNOR'

Formerly home to 1.8 million people, Detroit once had significant electoral muscle in Michigan. But Detroit's population has fallen to around 700,000 people, or less than 8 percent of the state's population, and the city has less support in the state capital, Lansing, than it did during its heyday.

The former automotive powerhouse's decline has long been compounded by financial troubles that are almost as well known as the music that made Motown famous.

"Make no mistake, Detroit is bankrupt," said Jim McTevia, a specialist in restructuring and managing member of management and financial consultant McTevia & Associates. "In this set of circumstances there is no downside for the governor.

"I think Snyder will be remembered as the politician who saved Detroit."

Cuts by the administration of Detroit Mayor Dave Bing to stave off the appointment of an emergency manager were vigorously opposed by some members of the city's council.

There have also been small protests in the city over the prospect of an unelected official taking over Detroit's purse strings. Pastor D. Alexander, a local leader of Jesse Jackson's Rainbow PUSH Coalition, said Snyder would suffer for a takeover if he runs for a second term in 2014.

"Governor Snyder risks wakening a sleeping giant," he said. "If Detroit comes alive, he will not be re-elected."

On Thursday, flanking Snyder and Orr, Bing showed his support for the emergency manager, saying, "There is no doubt that we are going to work together."

'PRAGMATIC, NOT DOGMATIC'

McTevia, the consultant, said a crucial point for Snyder is that any emergency financial manager will need help from city officials to succeed.

"This will take team work to fix," he said.

Michigan's governor also has the support of much of the local business community, which has applauded his support for a new bridge to Canada, which many conservatives oppose, and for regional transit and lighting authorities in Detroit.

"The reason why we are so supportive of the governor is that here's a Republican who has clearly chosen to support Detroit," Sandy Baruah, chief executive of the Detroit Regional Chamber of Commerce. "Governor Snyder is very pragmatic, not dogmatic.

"He's all about getting stuff done."

Lyke Thompson, a political analyst at Wayne State University, said that while taking over Detroit's finances "could be a win" for Snyder if the move is successful, the opposite would be true if the city ended up in bankruptcy as that "would happen on his watch."

"Things could get worse before they get better," he said.

Whether or not Snyder worries about what effect a state takeover would have on his re-election chances in 2014 is another matter. His office did not respond to a request for comment.

Since taking office in 2011, Snyder has frequently annoyed small-government conservatives, as he did last month with a plan to expand Medicaid and raise the gas tax for road repairs.

The governor also incensed liberals and the labor movement in December by signing "right-to-work" legislation that allows workers to opt out of union membership.

"I think the governor looks at issues through the eyes of a businessman and looks for solutions," said Pat O'Keefe, CEO of turnaround consultant O'Keefe. "I don't think Rick Snyder cares one way or another if he doesn't get reelected.

"And if he is successful he will have essentially established the blueprint for restructuring a major city's finances."

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